The NREGA does not work the way it is supposed to. Arjun Sengupta?s Commission has reported that only 25 days work is provided and not 100. There is a lot of leakage along the way. Am I surprised? No. This is just what Rajiv Gandhi said twenty plus years ago. We have learnt nothing, but unlike the Bourbons we have forgotten everything. The Central Government does not now have and has never had the capacity to deliver public goods over a wide area which requires reaching millions of people.
The bureaucracy eats up 85 % of the resources meant for the poor as Rajiv Gandhi found out. The Left sneers at the idea of trickle down, yet they favour doing things through the State. It is like throwing water down a well, but the well is overgrown with decades of neglect. There are may stops before the water can reach the bottom which is very deep. So, the failure of trickle down is built into the system.
In fighting terrorism, there is not enough centralisation. Law and order being a state subject the effectiveness of the mechanism is hampered by weaknesses of under-funding and political browbeating of the poor police. At the Centre there are far too many agencies to work in harness. The result is the fiasco which happened in Bombay on 26/11. So, there is too much centralisation in employment guarantee and not enough in fighting terrorism. In both cases the State is the actor and failure is the result. In fighting terrorism, the US has shown how effective centralisation, in the Department of Homeland Security, can work. There is enough muscle to claim and get adequate resources and a single co-ordinating focus. America has not had another attack since 9/11.
In employment generation, there are two issues. First it is a daft scheme since it discourages mobility of the poor in search of work away from where they are. Thus the incentives are perverse. But apart from that, if you must do it, why not engage the panchayat system directly? Skip the intermediate stage of state level bureaucracy and strengthen the bottom layer by passing money directly to those who may know the claimants at first hand. Add some extra cash for good implementation and you may achieve two things. Give the panchayats a reliable source of finance and make them independent of the states who resent any further erosion of their power so they sabotage panchayat raj.
Of course, the purpose of NREGA as of SEZs is nothing to do with growth, employment or equity. It has to do with financing political parties for elections by giving the intermediaries a large cut from public funds. In the old halcyon socialist days, Congress had monopoly of power so all corruption was concentrated in its hands. Indira Gandhi nationalised the banks and that made them a reliable source of cash as and when the ministers needed. That is why the political system approves of bank nationalisation. If it had benefited the people, we would not have had farmers suicides.
Once power slipped from Congress hands, corruption got democratised. Every political party, no matter how small, got a chance to play at the roulette wheel. ?When their chance came, they knew it would not last long. So they started lining their pockets blatantly from day one.
What with fragile coalitions at the Centre and in many states, all parties have to be kept sweet. So an NREGA here and thousands of crores for farmers there, scores of SEZs all too small to be useful in economic terms but marvellous for bribery were just the ticket. Liberal reform has generated growth and so revenues are flush. So while denouncing the market and praising the State, the political system enjoys a bonanza.
Of course a better answer would be to outsource the entire effort. Why pay the poor for 100 days work which is probably not very productive in the first place. Since they don?t get the money, and, if they do, the incentives are perverse, we should just give the money away directly to the poor. Just take the petrol subsidy which is about $50 billion or Rs 2 lakh crores. Why not give the same amount to all BPL individuals by a smart card which will work at ATMs?
We could easily get ICICI or State Bank or Reliance to get together and make up cheat-proof smart cards may be with finger printing embedded so that no one else can steal the money. The technology exists and India is a leader. Remember how elitist the access to telephones used to be. With mobile technology, there came real empowerment. Let the poor get their money directly. It will be cheaper.
?The author is a prominent economist and Labour peer